June 11 (Bloomberg) -- Philippine billionaire Lucio Tan has
been approached by a group of investors to sell his control of
PAL Holdings Inc. and Philippine Airlines Inc. as he prepares to
exit the aviation business after two decades.

Tan is “seriously looking into the proposal,” PAL said in
a filing today. He owns 51 percent of Philippine Airlines
through companies including PAL, which may be valued at $520
million based on figures derived from a sale in April last year.

The billionaire would be leaving an industry plagued by
U.S. and European bans that have prevented Philippine Airlines
from either flying to or expanding routes in those regions, and
led it to post losses in seven of the past eight quarters. The
announcement follows comments yesterday by San Miguel Corp.,
owner of a 49 percent stake in the airline, that it isn’t buying
Tan’s holding.

“San Miguel should have the right of first refusal, and it
doesn’t seem to be worried about matching an offer from an
outside buyer,” Jomar Lacson, an analyst at Campos Lanuza & Co.
in Manila, said by telephone today. “The logical investors
would be a group from San Miguel itself,” with possible
candidates being Ramon Ang, president of the Philippines’
biggest company, Chairman Eduardo Cojuangco Jr. or Roberto
Ongpin, a director, he said.

Potential Investors

LT Group Inc., Tan’s holding company, declined 5.3 percent
to 22.50 pesos at the close of trading in Manila, while San
Miguel fell 2.1 percent to 95 pesos. Trading in PAL, which owns
85 percent of Philippine Airlines, has been halted since the
start of the year after it failed to meet a 10 percent public-float rule.

There are two potential investors and their details aren’t
yet known, Ang, who is also PAL’s president, told reporters
after San Miguel’s annual shareholder meeting in Manila.

“If the buyer is friendly and a good strategic partner,
that’s enough” and the investors are probably from the airline
industry, Ang said. San Miguel “can think of buying” the stake
owned by Tan if they don’t see any benefit to the airline from
the potential investors, Ang said.

Tan, 78, gained control of Philippine Airlines in 1992 when
it was privatized. He sold a 49 percent stake in the carrier
last year to San Miguel, the nation’s biggest company by
revenue, for $500 million.

That price implies a value of about $520 million for his 51
percent holding, without accounting for costs and benefits
related to the airline’s business reorganization, Lacson said.

EU Blacklist

The Philippines has been on an E.U. aviation blacklist for
failing to meet safety standards, meaning its airlines can’t fly
into the region. The nation also has a Category 2 rating from
the Federal Aviation Administration that prevents its carriers
from adding routes in the U.S.

The two aviation authorities may upgrade the Philippines
after the International Civil Aviation Organization reviewed the
country’s air-safety improvements, President Benigno Aquino said
March 6.

PAL, Philippine Airlines’ parent, widened its net loss to
2.22 billion pesos ($51.6 million) in the third quarter ended
December from a loss of 1.23 billion pesos a year earlier,
according to data compiled by Bloomberg.

‘Overall Vision’

PAL will stay public and investment in the carrier is an
“important piece in our overall vision” for San Miguel,
Cojuangco told stockholders today.

Philippine Airlines is expanding its fleet, with 22 planes
to arrive this year and 25 more in 2014, Ang said. The carrier
projects revenue will increase 25 percent as it adds planes this
year, Ang said April 26. The carrier expects to fly to Europe
this year when the E.U. lifts its ban, he said.

The carrier will invest $10 million for a 49 percent
interest in Cambodia Airlines Co. and plans to complete the
transaction by July 15, it said in a filing on May 27. The
venture will probably boost its revenue by as much as $400
million, Ang said May 9.

PAL shareholders on March 15 approved the sale of as many
as 2.42 billion shares and an increase in the company’s
authorized capital by 30 percent to 30 billion pesos. It may
sell the shares this month, Ang said June 5.

Tan also owns Fortune Tobacco Corp., a cigarette maker, and
Asia Brewery Inc., the country’s second-biggest beermaker. The
airline stake sale may be part of estate planning by the
billionaire, according to Lacson.